Archive for the ‘Chart School’ Category

Preparing For Lower Returns

 

Preparing For Lower Returns

Courtesy of 

We’ve been hearing about the prospect of lower future returns for U.S. based investors for years now*. The thesis behind this is fairly straightforward; high recent returns coupled with high valuations in the stock market, and low interest rates in the bond market is not conducive to further above average returns.

Consider the following:

  • A U.S. only 60/40 portfolio has compounded at 10.5% over the last 10 years.
  • The CAPE ratio is at 30.9
  • The ten-year treasury is currently yielding 1.8%

The more you pay for an asset relative to its underlying fundamentals, the less you should expect to receive going forward. You can see this relationship in the chart below, which plots the inverted CAPE ratio on the left-axis, and forward 10-year returns on the right-axis.

But valuations don’t matter over the short-term, sometimes matter over the medium-term, and usually matter over the long term. This is a long way of saying that valuations are a terrible timing tool, as we’ve learned over the last few years. We can see the relationship between higher valuations and lower returns in the chart below. Again, they matter, but no guarantees.

Future bond returns, unlike stocks, can be boiled down to a single variable, starting yield. The chart below shows the relationship between the starting yield of a ten-year bond and the future ten-year returns.

Below is a scatter plot that shows just how tight this relationship is. Starting yield tells you pretty much all you need to know about forward returns.

Okay, so we suspect that the above average returns we’ve been accustomed to won’t continue forever. The obvious question is, what do we do with this information?

Here are a few ideas (not investment advice)

Go beyond the S&P 500. Value stocks have done well, despite lagging by nearly 2% per year, foreign stocks, both developed and emerging, have done bubkis, while commodities have done downright awful.

If you’re worried about not just lower returns, but a potential market crash, realize that…
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Top Patterns for Retail Investors

Courtesy of Read the Ticker

top-patterns-for-retail-investorsRetail investors are last in line for market leading research, no matter, the retail investor can profit from these secret sauce patterns..

Well not so secret now, the main point is you do not have to climb Mount Everest to be called a mountain climber, there are many other hills to climb to make your mark. Just like stocks.

You do not have to battle with the high frequency traders to win in the markets, there are long and slow methods to do just as well.  

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Some charts from the video

Pattern 1

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FPHAU

Pattern 2

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MCD

The video shows off some stocks of future trades.

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Changes in the world is the source of all market moves, to catch and ride the change we believe a combination
of Gann Angles,
Cycles,
Wyckoff and
Ney logic
is the best way to ride the change, after all these methods have been used successfully for 70+ years.
This post is a delayed and small sample of what is avaliable to members. Sign up to enjoy the full service.

NOTE: readtheticker.com does allow users to load objects and text on charts, however some annotations are by a free third party image tool named Paint.net

Investing Quote…

..”Nothing new ever occurs in the business of speculating or investing in securities and commodities.”..

Jesse Livernore Trading Rule

..“Investing should be like watching paint dry or watching grass grow. If you want excitement…go to Las Vegas.”…

Paul Samuelson

..“Successful speculation requires staying on top of changes in industries and companies that either create new industries or improve on existing industries. The majority of your profits will come from these two … The shrewdest traders throughout history all adapted the skill of reactionary change, as the market constantly presents new and different opportunities.”..

Bernard Baruch

..”If you have trouble


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Bad News For Crude Oil Should Come From This Pattern, Says Joe Friday

Courtesy of Chris Kimble

It’s a good idea for investors to be aware of key indicators and inter-market relationships.

Perhaps it’s watching the US Dollar as an indicator for precious metals or emerging markets. Or watching interest rates for the economy. Experience, history, and relationships matter. And it’s good to simply add these to our tool-kit.

Today, we look at another relationship that has signaled numerous stock market tops and bottoms over the years, and especially the past several months, Crude Oil.

When crude oil tops or bottoms, it seems that the stock market follows along. And with Crude oil reversing lower last week, it’s probably a good idea that investors pay attention here.

Joe Friday Just The Facts Ma’am: The past two times Crude Oil has created a reversal pattern at the Fibonacci 61% retracement level, it fell at least 15% from the highs. Odds are strong that due to this pattern, Crude will experience a similar decline again.

This article was first written for See It Markets.com. To see the original post CLICK HERE.

To become a member of Kimble Charting Solutions, click here.





Bull Case For Stocks, Testing Critical Breakout Level, Says The Inspector!

Courtesy of Chris Kimble

Some price points lend themselves to potential turning points. Is the S&P at one of those price points? The inspector suggests it is!

This chart looks at the S&P 500 over the past couple of years. Fibonacci was applied to the 2018 highs and 2018 lows.

The rally off the December 2018 lows, has the S&P testing its 161% extension level at (1).

While at this extension level, momentum is the 2nd highest in the past 5-years.

The Fibonacci extension level becomes a price point where some stock market bulls need/want to see a breakout. If accomplished, it sends them a strong bullish message

Stock market bulls would receive a short-term concerning message should selling pressure or a reversal pattern take place, at this key Fibonacci extension level.

To become a member of Kimble Charting Solutions, click here.





“It Just Keeps Getting Crazier” – Options Speculation Reaches Record High

Courtesy of ZeroHedge

Despite the fact that the bond market refuses to sell-off (as it should in a well-behaved market sending stocks to record-er and record-er highs each and every day), the levered long crowd has never been more "all-in" than they are right now.

While stocks are at record highs, bond yields are plumbing 2 month lows…

Source: Bloomberg

However, there are some notable anomalies in the VIX term structure that could become problematic in the next few days. As contracts expire, so the very steep term structure (fueling lots of short-vol-tilted carry trades) will flatten…

Source: Bloomberg

“This January VIX settlement is looking similar to January 2018 in that the new front month VIX spread between February and March is going to dramatically shrink the level of contango,” said Dave Roberts, independent trader of volatility and volatility products, using the trader term for an upward curve.

“Combining this mechanical condition with potential risk-off factors of Sanders winning Iowa and poor earnings reports from the tech heavyweights has the ability to turn a regular pullback in something more meaningful.”

And as Nomura's Charlie McElligott notes, in risk-asset bellwether US Equities, the current 96th %ile aggregate Dealer “Long $Gamma” position (~$31B between 3290 / 3300 / 3310 alone!) continues to act as a “gravitational force” for the S&P.

Source: Nomura

But, McElligott points out, there is a potential “UN-CLENCHING” in the SPX price-action IF (and that’s a BIG “if”) we don't see these options rolled up-and-out – because per our estimates, nearly 36% of the total $Gamma across strikes is set to drop-off following Friday’s expiry, which should then allow us greater freedom to move in either direction.

Source: Nomura

However, that hasn't stopped the momentum chasers adding more and more leverage.

Speculative excess has hit a fresh record among U.S. options traders – and that’s a negative for stocks over the medium term, according to Sundial Capital Research Inc.

Bloomberg reports that traders established fresh bullish positions


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“Buying Momentum Has Fizzled Out”: Hedge Funds, CTAs Are Now All-In

Courtesy of ZeroHedge

When it comes to investor positioning and flows, we have been quite clear over the past two weeks: with stocks hitting all time highs on a daily basis, we first reported on Jan 11 that "Institutions, Retail And Algos Are Now All-In" and then again one week later, "Never Before Seen Market Complacency, As Everyone Goes Even More "All In"."

Confirming one part of this, overnight Goldman showed that equity net future positioning of hedge funds has hit an all time high, meaning there is little marginal space left for the smart money to buy.

Today, Nomura's two quants confirmed that when it comes to CTAs, they are indeed all in. As Nomura's Charlie McElligott writes, that "all major markets we track at + or – “100%” signals across the board which then allows for more leverage to be deployed into the positions / larger gross exposures":

At the same time, Nomura's other quant, Masanari Takada echoes this and writes "CTAs’ net long position in US equity futures has started to look excessive, and the momentum behind the buying seems to have fizzled out." According to the Nomura quant, this means that "Breezy bullishness looks like a bad idea at this point" and that "the situation looks primed for an overdone sell-off in response to even small fluctuations in the market."

What is the bigger picture? Here Takada preaches caution, noting that as a result of the Coronavirus concerns, "global equity markets have become jittery" and adds that "timing-wise… most hedge funds have swung to taking profits on their long positions in DM equities. It may be that these hedge funds have seized on the new coronavirus outbreak as a reason to take profits now."

Our estimates of major hedge funds’ exposure to DM equities (30-day beta) show that more hedge funds are exiting longs now than was the case at the end of December. Of course, long/short funds and other fundamentals-based, value-oriented investors following bottom-up strategies are feeling out dips to buy. Prior to this, however, global macro hedge funds, managed futures funds, and other such top-down investors


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How high above the 200-day can the S&P 500 get?

 

How high above the 200-day can the S&P 500 get?

Courtesy of 

The big news this past week is that the S&P 500 got way out ahead of its 200-day moving average – more than 11% above, in fact.

Michael wrote about how shitty of a timing signal this measure is here, if you haven’t read it yet you CANNOT miss it.

In the meanwhile, Jon Krinsky notes that while we may be stretched based on recent history, in the 1990’s, the S&P was routinely more than 10% above the 200-day moving average, which led to consolidation periods followed by even higher new highs.

Here’s two charts from Jon:

It’s notable that this extreme breadth surge has happened with the SPX stretched vs. its 200 DMA. It is now at the widest spread (over 11%) since January 2018. Of course when momentum gets strong like it was two years ago, and it is now, there is no rule for how stretched things can become. It peaked at around 14% in Jan. ’18, and routinely was above 15% in the late 1990’s

By mid 1995, the SPX was 14% above its 200 DMA. You can see it routinely traded above that threshold over the last half of the decade, and while it did check back to its 200 DMA many times, there were other times where the market moved sideways or pushed even higher

Source:

What Happens When You Have a Breadth Surge and the SPX is Stretched?
Baycrest Partners – January 20th, 2020

Follow Jon Krinsky on Twitter! 





Hang Seng Index Double Topping At 2007 Highs?

Courtesy of Chris Kimble

Could the Hang Seng Index be “Double Topping” at its 2007 highs? Possible, yet not proven!

The Hang Seng Index attempted to break above its 2007 highs at (1), only to see a key reversal pattern take place the following month.

After the reversal pattern, the index has created a series of lower highs, just below falling resistance.

So far this month, the index is attempting to break above falling resistance, where it could be created a bearish reversal monthly pattern at (2).

What would it take to prove that a double top was in play for this key Asian index? A break of support at (3).

To become a member of Kimble Charting Solutions, click here.





RTT browsing latest..

Courtesy of Read the Ticker

rtt-browsing-latestPlease review a collection of WWW browsing results. The information here is delayed by a few months, members get the most recent content.

Date Found: Monday, 16 September 2019, 05:22:48 PM

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Comment:
This chart says SP500 should go back to 2016 levels (overshoot will occur of course)

Date Found: Tuesday, 17 September 2019, 01:53:30 AM

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Comment:
This would be HUGE…got gold!

Date Found: Wednesday, 18 September 2019, 01:40:53 AM

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Comment:
QE good for Gold (subject to US Govt 33000 naked short sale in 2013)

Date Found: Friday, 20 September 2019, 03:27:25 AM

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Comment:
Otavio (Tavi) Costa @TaviCosta8hThis is huge. 30-year yield vs. core CPI at its lowest level since 1980s! 10-year real yield? Same. Plunging as they did in mid

Date Found: Saturday, 21 September 2019, 02:54:49 AM

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Comment:
Inventories go up because (1) You cant sell the stuff, forecast demand incorrectly or (2) you are anticipating strong future demand, hence the build up: Most likely (1) in this case! Concur!

Date Found: Saturday, 21 September 2019, 11:37:06 PM

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Comment:
MOST IMPORTANT chart in the world, US is lagging interest rate cuts vs rest of world major central banks. Is the FED forcing a recession (anti TRUMP ??). FED must cut 50bps NOW to normalize.

Date Found: Tuesday, 24 September 2019, 07:00:06 AM

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Comment:
Wait what? You can bet on a NO DEAL BREXIT BMW wants to sell cars to UK. UK get ready to BOOM! Real buying power coming your way! Pound to get stronger!

Date Found: Wednesday, 25 September 2019, 02:31:12 AM

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SP500 Kitchin Cycle Review

Courtesy of Read the Ticker

sp500-kitchin-cycle-reviewThe biggest known news date in the next 18 months is the US Election. The biggest unknown news date is when the US believes it is in a economic recession.

The Kitchin Cycle is still working.

We must conclude the major 900 period low is now in, and we are now in a up swing, which may top out ate 2020 or late 2021. Any future top out may only generate a 10% to 20% correction, of course this can be deemed very mild. This is expected, but the expected does always play out. 

Rolling the dice to get '7' does not always work. Post US elections seasonal's aligned with a poor start of the decade seasonal trends, add on high global recession risk, add on a stock market slump tends to occur in the years ending 9,1,2,3,4 (like 1973, 1982, 1991, 2001, 2009 are all recession years), markets may get very interesting.

 

Season1


We will continue to watch the Kitchin cycle with interest. 


SP500 cycle


The pullbacks in the SP500 have really tested below 20% over the 10+ year period. This very strange for such a long period of time, is it the algo's or the FED's trading team. Who knows! However the point is if price ever gets below 20% on a weekly close then you can bet the following sell off will be spectacular. 


SP500 stop loss

     

Divider
 

Changes in the world is the source of all market moves, to catch and ride the change we believe a combination of Gann AnglesCyclesWyckoff and Ney logic is the best way to ride the change, after all these methods have
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Zero Hedge

San Francisco Activates Emergency Operations Center To Prepare For Coronavirus 

Courtesy of ZeroHedge View original post here.

Increasing fears of coronavirus spreading across the U.S. have resulted in San Francisco Mayor London Breed to activate the city’s emergency operations center, reported the San Francisco Chronicle

“It’s, so we have a centralized location...



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Phil's Favorites

Coronavirus outbreak: WHO's decision to not declare a global public health emergency explained

 

Coronavirus outbreak: WHO's decision to not declare a global public health emergency explained

Masks are selling out in Singapore amid concerns about the Wuhan virus. Ng Sor Luan/EPA

Courtesy of Tom Solomon, University of Liverpool

The World Health Organization’s decision to not declare the novel coronavirus outbreak in China a public health emergency of international concern, or PHEIC, will surprise many. The number of reported cases and deaths is doubling every co...



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Insider Scoop

4 Energy Stocks Moving In Monday's After-Market Session

Courtesy of Benzinga

Gainers

SAExploration Holdings, Inc. (NASDAQ:SAEX) stock moved upwards by 6.3% to $2.77 during Monday's after-market session.

Abraxas Petroleum, Inc. (NASDAQ:AXAS) stock surged 6.2% to $0.30. According to the most recent rating by Johnson Rice, on November 19, the current rating is at Accumulate.

Pacific Drilling, Inc. (NYSE:PACD) stock increased by 4.7% to $1.80. The most recent rating by Fearnleys...



http://www.insidercow.com/ more from Insider

Chart School

Top Patterns for Retail Investors

Courtesy of Read the Ticker

Retail investors are last in line for market leading research, no matter, the retail investor can profit from these secret sauce patterns..

Well not so secret now, the main point is you do not have to climb Mount Everest to be called a mountain climber, there are many other hills to climb to make your mark. Just like stocks.

You do not have to battle with the high frequency traders to win in the markets, there are long and slow methods to do just as well.  

More from RTT Tv







Some charts from the video


...

more from Chart School

The Technical Traders

The Wuhan Wipeout - Could It Happen?

Courtesy of Technical Traders

News is traveling fast about the Corona Virus that originated in Wuhan, China. Two new confirmed cases in the US, one in Europe and hundreds in China. As we learn more about thispotential pandemic outbreak, we are learning that China did very little to contain this problem from the start. Now, quarantining two cities and trying to control the potential
outbreak, may become a futile effort.

In most of Asia, the Chinese New Year is already in full swing.  Hong Kong, China, Singapore, Malaysia, India and a host of other countries are already starting to celebrate the 7 to 10 day long New Year.  Millions of people have already traveled hundreds of thousands of miles to visit family...



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Kimble Charting Solutions

Bad News For Crude Oil Should Come From This Pattern, Says Joe Friday

Courtesy of Chris Kimble

It’s a good idea for investors to be aware of key indicators and inter-market relationships.

Perhaps it’s watching the US Dollar as an indicator for precious metals or emerging markets. Or watching interest rates for the economy. Experience, history, and relationships matter. And it’s good to simply add these to our tool-kit.

Today, we look at another relationship that has signaled numerous stock market tops and bottoms over the years, and especially the past several months, Crude Oil.

When crude oil tops or bottoms, it seems that ...



more from Kimble C.S.

Biotech

Snakes could be the original source of the new coronavirus outbreak in China

Reminder: We are available to chat with Members, comments are found below each post.

 

Snakes could be the original source of the new coronavirus outbreak in China

Chinese cobra (Naja atra) with hood spread. Briston/Wikimedia, CC BY-SA

Haitao Guo, University of Pittsburgh; Guangxiang “George” Luo, Univers...



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Members' Corner

The War on All Fact People

 

David Brin shares an excerpt from his new book on the relentless war against democracy and how we can fight back. You can also read the first, second and final chapters of Polemical Judo at David's blog Contrary Brin.

The War on All Fact People 

Excerpted from David Brin's new book, the beginning of chapter 5, Polemical Judo: Memes...



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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

The ‘experts’ I hear from keep saying that once 300B more in reserves have ...



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Digital Currencies

Cryptos Have Surged Since Soleimani Death, Bitcoin Tops $8,000

Courtesy of ZeroHedge View original post here.

Bitcoin is up over 15% since the assassination of Iran General Soleimani...

Source: Bloomberg

...topping $8,000 for the first time since before Thanksgiving...

Source: Bloomberg

Testing its key 100-day moving-average for the first time since October...

...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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